“I think we will be spending a lot of time with the Attorney General,” said Sen. Debra Plowman, R-Hampden. “There are so many changes and policy decisions that we have to make. There is so much happening, it is just amazing.”

She said a U.S. Justice Department ruling last month dominated the discussion at the conference. The department reversed its interpretation of the 1961 Wire Act that banned online gambling and said state lotteries are not prohibited from offering online wagering within their state.

“That means we could sell lottery tickets online, people could buy their tickets from home and never visit a retailer and that also has an impact,” Plowman said. “What would that mean to a mom and pop store that depends on the traffic they get from selling lottery tickets? We have to answer a lot of questions.”

Rep. Linda Valentino, D-Saco, also attended the meeting held in Las Vegas. All three lawmakers had their expenses paid by the council, which is seeking to have Maine join the group. She said the meeting provided a huge amount of information about all sorts of gambling and many sessions focused on the Justice Department statement.

“This is big,” she said. “We need to bring in the lottery, we need to bring in [Gambling Control Board] Director [Patrick] Fleming, we need the Attorney General to be involved and we are going to have to make a lot of policy decisions.”

Valentino said there were also a lot of unanswered questions raised at the conference. For example, she said, some experts believe a state could set up an Internet gambling site for an international market even though they could not allow residents of other states to gamble on the site.

“There are policy implications, there are financial implications,” she said.

Rep. Douglas Damon, R-Bangor, said he was impressed at the expertise at the meeting and agreed the state needs to move swiftly to address the many policy questions raised by the Justice Department’s change of view.

“We’ve got two facilities in this state that could be impacted by an increase in Internet gambling,” he said. “Not that we don’t have Internet gambling now, because we do. Just go up to the university and look at all of the online poker games being played.”

Damon said at the conference it was clear about half the industry thought the development would be good, and the other half thought it would be bad. He said the state needs to carefully review all of the possible impacts on Maine and decide policy that is sensible.

“I don’t believe we are prepared to handle it now,” he said. “Not at all.”

Valentino agreed and said, as in many areas, the state is playing catch-up when it comes to technology. She said in Europe there is betting done from a person’s living room as they are watching a soccer match on whether the player will make a penalty kick.

“It’s all going to change,” she said. “We are going to see tablets like iPads that are handed to someone when they go in to a casino with all the games loaded on it. No more big slot machines, it will all be on one device.”

Plowman said the state needs to look at how it oversees gambling and consider if it should be placed under one agency. She said with more complex forms of gambling, the state will need to have better oversight and investigation capacity.

Damon said while there may be some policy questions that need to be decided during this session, he believes the scope of the issues warrant a separate committee or commission.

“Like with LD 1 where we had a special committee just to deal with regulatory reform, I think that’s what we need to deal with all of the gambling issues,” he said.

The three lawmakers will present their findings to the full committee later this week.

Source: Bangor Daily News

Supporters of legalizing online poker cheered the ruling but said it may create confusion and encourage the creation of a patchwork of state Internet gambling rules. Congress passed legislation in 2006 aimed at barring online gambling in the United States by prohibiting financial institutions from processing payments for online bets.

“I think that this ruling creates more confusion than clarity in the Internet gambling debate,” American Gaming Association President and CEO Frank Fahrenkopf  told National Journal in an interview.

Critics of the 2006 law say it has not prevented Americans from gambling online. Many Americans continue to gamble on websites based outside the United States, a situation that deprives U.S. players of consumer protections and state and federal governments of tax revenues, said John Pappas, executive director of the Poker Players Alliance. Pappas and others say Congress needs to step in with federal online poker legislation.

Both Pappas’ group and the American Gaming Association favor legislation that would legalize and regulate online poker. Rep. Joe Barton, R-Texas, introduced a bill last year, though Fahrenkopf’s group has not taken a formal stand on it. Supporters say poker is a game of skill and can be more easily regulated online than other forms of Internet gambling.

Barton said while the Justice memo makes clear that playing poke online does not violate the Wire Act, the department’s interpretation of the law could lead states to adopt a variety of individual laws.

“If Congress doesn’t act soon we could end up with fractured rules and regulations that vary state to state, leaving more opportunity for fraud and fewer safeguards for players,” Barton, a senior member of the Energy and Commerce Committee, said in a statement. “I plan to keep moving forward with my efforts to move H.R. 2366 through the committee process, and I am confident it will be passed by the House and Senate – hopefully in this session.”

Senate Majority Leader Harry Reid, D-Nev., also is reportedly working on online poker legislation and has been aiming to gain the support of Sen. Jon Kyl, R-Ariz., who helped craft the 2006 anti-gambling law, according to industry sources and news reports. Spokesmen for both Reid and Kyl did not respond to requests for comment.

The Energy and Commerce Subcommittee on Commerce, Manufacturing and Trade has held two hearings on Internet gambling and is likely to hold at least one more to gather additional feedback from the Justice Department and other officials on the issue. A spokesman for subcommittee Chairwoman Mary Bono Mack, R-Calif., said she has not made up her mind whether she will support Barton’s bill, which must go through her panel.

The Justice Department has reversed its long-held opposition to many forms of Internet gambling, removing a big legal obstacle for states that want to sanction online gambling to help fix their budget deficits.

The new policy merely reverses the Justice Department’s longstanding position that all forms of online gambling are illegal in the United States. It does not necessarily pave the way for national rules governing online gambling.

But experts in gambling law said Saturday that the new policy does imply that states can band together to allow gambling across state borders. The exception would be online sports betting, which is explicitly prohibited under federal law.

More here and here.

By year’s end Washington D.C. hopes to introduce an Internet gambling hub that would allow Washington residents to play blackjack, poker and other casino-style games.

“They can do it from Starbucks, a restaurant, bar or hotel, or from a private residence,” said Buddy Roogow, executive director of the D.C. Lottery, who expects the new games to eventually raise $9 million a year. “That’s real money in D.C.”

It’s an idea gaining currency around the country: virtual gambling as part of the antidote to local budget woes. The District of Columbia is the first to legalize it, while Iowa is studying it, and bills are pending in places like California and Massachusetts.

But the states may run into trouble with the Justice Department, which has been cracking down on all forms of Internet gambling. And their efforts have given rise to critics who say legalized online gambling will promote addictive wagering and lead to personal debt troubles.

The states say they will put safeguards in place to deal with the potential social ills. And they say they need the money from online play, which will supplement the taxes they already receive from gambling at horse tracks, poker houses and brick-and-mortar casinos.

- Source: NYTimes.com

“We are aware of the indictment only through what has been announced publicly,” Bristol, Connecticut-based ESPN said yesterday in an e-mailed statement. “For the immediate future, we are making efforts to remove related advertising and programming pending further review.”

On Friday, 11 people, including the founders of the three largest online poker companies doing business in the U.S.—PokerStars, Full Tilt Poker and Absolute Poker—were charged with offenses including bank fraud, money laundering and online-gambling offenses.

Yesterday, Bradley Franzen, one of 11 people charged last week with being part of an online gambling conspiracy, pleaded not guilty before a U.S. magistrate in New York.

Franzen, 41, of Illinois and Costa Rica, is accused of lying to banks about the nature of the transactions they were processing, and of creating fake companies and websites to disguise payments to poker companies.

Federal prosecutors in Manhattan have alleged the poker companies, which are located outside the U.S., tried to sidestep U.S. laws prohibiting banks and credit card issuers from processing gambling payments by disguising billions of dollars from U.S. gamblers as payments to nonexistent online merchants for golf balls, jewelry, flowers and other merchandise.

This crackdown is far stronger than any seen from the Bush administration, and is disappointing for those who had hoped for a better stance on civil liberties from the Obama administration. The Poker Players Alliance issued the following statement after the busts

On behalf of the millions of poker players across the country, we are shocked at the action taken by the U.S. Department of Justice today against online poker companies and will continue to fight for Americans’ right to participate in the game they enjoy. Online poker is not a crime and should not be treated as such. We are currently gathering all of the information around today’s announcement and will offer detailed analysis when the full facts become available.

Source: PPA

Permitting the online games was part of the 2011 budget and a 30-day period for Congress to object expired last week, said D.C. Council member Michael A. Brown, who authored the provision. The gaming would be operated by Intralot, a Greece-based company, and would be available only to gamblers within the borders of the district.

Officials were not sure when the gaming would be up and running, though DC lottery officials said they were in talks with their vendor and expect to know more within weeks. Though other states have contemplated legalizing online poker, experts said the district would be the first jurisdiction in the country to do it.

The move to legalize the games comes despite a 2006 federal law that effectively banned Internet gambling. The law basically prohibited banks and credit card companies from processing payments from gambling companies to individuals. But the law is murky, and gambling experts say it created enough grey areas to open the door for a deeper expansion into the multibillion dollar industry.

“There was really no clear law that said we could not do this,” Brown said Wednesday.

D.C. hopes to tap those millions to help offset budget cuts and help social services programs, Brown said. Conservative estimates from D.C.’s chief financial officer indicate the district could bring in around $13 million to $14 million through fiscal year 2014, according to Brown’s office.

The gambling green light is no doubt good news to poker players, but D.C. would be authorized to offer other games of both skill and chance. It would be up to lottery officials to come up with regulations and decide which games to permit.

“Anytime you’re cutting budgets and you want to save some programs, you’re looking for different pieces from different pots and you hope that you get to the number that restores those budget shortfalls and that’s what we’re trying to do with this,” Brown said.

Full Story at Washington Post

Reid, a Nevada Democrat, decided against adding his measure to a compromise tax-cut package amid concerns it would undermine the tax bill’s prospects for passage, the newspaper said, citing unidentified lobbyists and congressional aides.

The Internet poker legislation would keep jobs from the multibillion-dollar online gaming industry in the U.S. and empower federal and state governments to tax its revenue, Reid said Dec. 9 in a statement. The measure would help protect millions of online poker players from fraud while banning all other types of Internet gambling, he said.

“Experienced regulators already trusted by millions of Americans will maintain oversight and reputable operators with proven track records will provide a secure gaming environment for Americans,” Reid said.

Three U.S. House Republicans objected last week to what they called a “secretive, closed-door, undemocratic” effort in the Senate to pass the online-poker bill in the final days of the lame-duck Congress.

“Creating a federal right to gamble that has never existed in our country’s history and imposing an unprecedented new tax regime on such activity require careful deliberation, not back- room deals,” Representatives Spencer Bachus of Alabama, Dave Camp of Michigan and Lamar Smith of Tennessee said in a Dec. 1 letter to Reid and his Republican counterpart, Mitch McConnell of Kentucky.

House Committees

Bachus, Camp and Smith are all in line to be chairmen of committees with jurisdiction over online gambling when Republicans take control of the House in January.

Internet gambling has provoked heated debate in Congress over the past few years. Proponents say regulating online poker and other games would bring billions into federal coffers, while opponents contend that it would encourage Americans to make poor financial choices and could open the market to children.

A House committee in July approved legislation that would legalize some Internet gambling, allowing U.S. residents to place online wagers with companies the Treasury Department has licensed. It has not been taken up by the full House or in the Senate.

Although online gambling is popular with millions of Americans, it is illegal in the United States, and the casino industry has considered it a threat.

But a trade group that represents major casinos like Harrah’s Entertainment, MGM Resorts and Wynn Resorts is working on a proposal that would ask Congress to legalize at least some form of online gambling, the group’s chief executive said.

The group, the American Gaming Association, issued a statement in the spring suggesting that online gambling could be properly regulated — the first public indication that its hard-line stance was softening.

The chief executive, Frank J. Fahrenkopf Jr., said in an interview by phone that the association had not settled on the details of its proposed legislation, including how the proceeds from Internet gambling would be taxed. “We have been working on something,” he said, “and continue to work on it.”

Gambling specialists said it was likely that any casino-supported legalization would be limited to Internet poker because it was considered the least threatening to brick-and-mortar casinos. Internet poker already had the backing of some in the casino industry, and was seen as a new and lucrative source of revenue for the casino companies.

Congress has been weighing a bill by Representative Barney Frank, Democrat of Massachusetts, that would legalize all types of Internet gambling apart from sports betting. In July, the House Financial Services Committee approved the Frank bill, but most industry analysts give it little chance of passage in the full Congress because it is opposed by the big casinos and some other gambling interests.

The move by casinos to open the door to online gambling could bring a powerful new lobbying force into Congressional debate. It would also most likely intensify fights in state legislatures as various gambling interests — groups that include lotteries, racetracks and Indian tribes — push lawmakers to grab more gambling dollars for states by moving to the Web.

California, Florida and New Jersey recently made unsuccessful efforts to legalize Internet betting on casino-style games, said Mark Balestra, the director of the BolaVerde Media Group, a consulting firm in St. Louis that tracks Internet gambling. Current law does not prevent in-state gambling over the Internet but to do so across state lines would require a change in federal law.

The flurry of activity suggests the state efforts will continue, Mr. Balestra said. “Gambling expansion typically happens during difficult times,” he said.

For some time, operators of large casinos have been split on the industry’s approach to Internet gambling.

Some companies like Harrah’s, which has actively supported legalization, have aggressively invested in software companies or businesses involved in Internet gambling overseas. Harrah’s, which operates the popular World Series of Poker, has also been building a prospective customer base. Last month, the company ran a full-page advertisement in USA Today, inviting readers to take part in a nongambling Internet version of the event.

But other operators like Wynn Resorts have argued that online gambling would, among other things, cannibalize profits by reducing casino attendance. In recent years, casino operators have sought to generate added revenue from visitors by investing heavily to turn smoke-filled gambling rooms into “resorts” that feature fine dining and other amenities.

The chief executive of Wynn Resorts, Stephen A. Wynn, also stated last year in response to a reporter’s questions that he thought it “would be impossible” to regulate Internet gambling.

However, the company, when recently asked for comment, issued a more temperate statement. “Wynn Resorts monitors any legislative activity, federal or state, that pertains to our industry,” the statement said. “We make judgments after such legislation is passed.”

A gambling industry analyst, Sebastian Sinclair, said that a change of heart among casino operators like Wynn Resorts should not be surprising, given the stakes involved. One of the Internet poker industry’s biggest sites, Pokerstars, which operates on the Isle of Man in the Irish Sea, has estimated annual revenues of $1 billion, according to Poker Analytics, a consulting firm in New York.

“When any industry is confronted with something of this nature, a game changer that is a paradigm shift, the first reaction is to circle the wagons to protect your business,” Mr. Sinclair said. “But then, that changes over time.”

Senator Harry Reid of Nevada, the Senate majority leader, might also be rethinking his opposition to Internet gambling. A spokesman for Mr. Reid said he was still reviewing the Internet issue and had not decided. Last month, The Reno Gazette Journal reported that several operators of smaller casinos in Nevada had left a meeting with Mr. Reid, a former state gambling regulator, with the impression that he was prepared to support a bill legalizing online poker.

Bill Hughes, the marketing director of one of those operations, the Peppermill Resort Casino in Reno, said that smaller operators viewed online poker as a threat to profits and jobs. Typically, poker accounts for about 2 percent of a casino’s revenues but some operators contend its legalization would soon lead to online versions of other casino games. “It opens the crack in the door to expand to all types of gaming online,” Mr. Hughes said.

Mr. Fahrenkopf, of the casino trade association, said that his group started about two years to look closely at a number of issues involved in Internet gambling, including taxation, online security and consumer protection.

He said that the big turnabout came when a study by a panel of industry officials concluded that online poker would not cut casino profits to the degree some operators had feared.

Poker Analytics said that data it compiled indicated that there were significant differences between those gambling in casinos and those playing poker on the Web. Among them, it said, was that people who played poker online were more likely to be male and less wealthy than those who visited casinos.

The deal comes at a time when a number of governments both in Europe and the United States are relaxing the rules on online gambling, hoping to tax the activity and use the revenue to reduce gaping budget shortfalls.

“We will immediately be a leader in these markets as they open up,” the chief executive of PartyGaming, Jim Ryan, said Thursday during a conference call.

PartyGaming, whose shares are traded in London, was once the world’s largest Internet poker site, but it was hit hard by a crackdown in the United States on online gambling that was passed into law in 2006. The company immediately withdrew from the country, costing it more than three-quarters of its business and ceding the market to privately held companies based in offshore locations, including PokerStars and Full Tilt.

On Wednesday, the Financial Services Committee of the House of Representatives approved a bill that would overturn the 2006 law.  Supporters say taxes on Internet betting could yield as much as $42 billion for the government over 10 years.

In Europe, Italy and France recently began allowing privately owned gambling sites to operate in competition with state-controlled monopolies. Other countries are considering similar moves, allowing them to tax Internet betting, a business worth nearly $30 billion globally, according to H2 Gambling Capital, a consulting firm.

Until now, online gambling has operated in a legal limbo across much of Europe, with governments neither officially allowing it nor able to tax it. The changes could provide opportunities for online gambling companies like PartyGaming and Bwin to expand their business, analysts say, but could also create new financial pressure.

“They’re going from a no-tax environment to a high-tax environment, and that’s challenging,” said Warwick Bartlett, chief executive of Global Betting & Gaming Consultants. “This is a deal that’s being made out of necessity rather than choice.”

The merger would bring together companies that in 2009 generated gambling revenue of 682 million euros, or $893 million, and earnings before interest, taxes, depreciation and amortization of 196 million euros. Under the merger agreement, Mr. Ryan of PartyGaming would share the chief executive role with Norbert Teufelberger, who is currently co-chief executive of Bwin, along with Manfred Bodner. Mr. Bodner would become a nonexecutive director.

Analysts say the companies are a good fit because Bwin has a big presence in sports betting while PartyGaming is stronger in online poker and casino games. The deal would allow them to cut costs and to cross-promote each other’s sites, potentially reaching new customers.

The shares of both companies surged Thursday on news of the deal, which follows months of speculation that Bwin and PartyGaming might merge. Now, analysts say, further consolidation is likely in the industry.

On Wednesday, the House Financial Services Committee approved a bill that would effectively legalize online poker and other nonsports betting, overturning a 2006 federal ban that critics say merely drove Web-based casinos offshore.

The bill would direct the Treasury Department to license and regulate Internet gambling operations, while a companion measure, pending before another committee, would allow the Internal Revenue Service to tax such businesses. Winnings by individuals would also be taxed, as regular gambling winnings are now. The taxes could yield as much as $42 billion for the government over 10 years, supporters said.

The two measures — which are backed by banks and credit unions but have divided casinos and American Indian tribes — are far from becoming law. A bill to legalize online poker sponsored by Senator Robert Menendez, Democrat of New Jersey, has not yet had a hearing. The Congressional timetable has little spare room before the midterm elections, and the Obama administration has not taken a position.

But the vote suggests a willingness by Congress to look for unconventional ways of plugging holes in the budget and comes as struggling states have also been looking to extract revenue from the gambling industry, which took a hit as consumers cut back on travel and entertainment during the recession but continues to reap billions of dollars in annual profits. The committee vote Wednesday was 41 to 22, with seven Republicans joining most Democrats on the panel in favor of the measure.

Last year, Colorado expanded casino hours, raised maximum-bet limits and permitted roulette and craps, while Missouri eliminated a $500 loss limit at riverboat casinos. Delaware and Pennsylvania have weighed proposals to allow the conversion of slots parlors into full-service casinos, making further inroads into the eroding Atlantic City gambling industry.

Opponents, who only four years ago, when Congress was controlled by the Republicans, secured a law that banned the use of credit and debit cards to pay online casinos, said they were aghast. “People sometimes resort to drastic things when they are strapped for cash,” said Representative Robert W. Goodlatte, Republican of Virginia, who called the new proposals “unfathomable.”

Representative Barney Frank, the Massachusetts Democrat who leads the Financial Services Committee, has been the legislation’s champion.

“Some adults will spend their money foolishly, but it is not the purpose of the federal government to prevent them legally from doing it,” Mr. Frank said.

The committee’s top Republican, Representative Spencer Bachus of Alabama, noting the passage of far-reaching changes in financial regulation this month, said that “after all the talk last year about shutting down casinos on Wall Street,” he was incredulous that members would vote to “open casinos in every home and every bedroom and every dorm room, and on every iPhone, every BlackBerry, every laptop.”

Mr. Bachus said lobbyists had spent “tens of millions” to overturn the 2006 law. “They’ve had quite a bit of success in turning votes,” he said.

Supporters of legalization said fiscal considerations played a role in their thinking. “I was looking for the money,” Representative Jim McDermott, Democrat of Washington, said in an interview. He sponsored the companion measure to allow taxation of Internet gambling; he wants to dedicate the money to education.

Representative Brad Sherman, Democrat of California, said in an interview that the money was an attractive source of financing for other programs. “We will not pass an Internet gaming bill,” Mr. Sherman predicted. “We will pass a bill to do something very important, funded by Internet gaming.”

He added, “Forty-two billion dollars over 10 years has an effect.”

The legal status of online gambling has long been murky. The Justice Department asserts that the Wire Act of 1961 prohibits it, but prosecutors have largely left individual gamblers alone.

To crack down on the activity, a 2006 law — inserted at the last minute into an unrelated bill in one of Congress’s last actions before Democrats took control — banned financial institutions from transmitting payments to and from gambling operators.

In the same year, the authorities arrested David Carruthers, a British online-gambling executive, as he changed flights at a Texas airport. He was sentenced to 33 months in prison for racketeering. Last year, the authorities ordered four banks to freeze the accounts of online payment processors that owed money to some 27,000 people who had used offshore poker sites.

But the enforcement actions have barely put a dent in the industry, experts say. Gamblers have used online payment processors, phone-based deposits and prepaid credit cards to circumvent the ban. By some estimates, American online gambling exceeds $6 billion a year.

“Today, any American with a broadband connection and a checking account can engage in any form of Internet gambling from any state,” Annie Duke, a professional poker player, testified in May on behalf of the Poker Players Alliance, which hired a former Republican senator from New York, Alfonse M. D’Amato, to lobby for the bill.

Michael Brodsky, executive chairman of YouBet.com, an online site for parimutuel horse racing, said, “As with Prohibition, illegal online gambling is thriving as an underground economy.”

Banks and credit unions said the 2006 law was poorly drafted — so much so that the Obama administration delayed, to June 1 of this year, the deadline for banks to comply with the law, to address concerns about its enforceability.

In 1999, the National Gambling Impact Study Commission urged the prohibition of Internet gambling. Attorney General Eric H. Holder Jr. has said he would not support efforts to legalize online gambling, a view shared by most state attorneys general.

“Because Internet gambling is essentially borderless activity, from a money-laundering and terrorism-financing perspective, it creates a regulatory and enforcement quagmire,” said James F. Dowling, a former special agent with the Internal Revenue Service.

And Mr. Bachus released a November letter from the F.B.I. in which Shawn Henry, the assistant director of the cyber division, said it would be difficult for companies to verify the age and location of their customers.

The bill contains measures intended to protect minors and combat compulsive addiction. It would allow states and Indian tribes to “opt out,” so players from those states and reservations would not be able to make online bets. But those governments would have a potentially lucrative incentive to allow the activity since they could then collect taxes from Internet casinos.

Before voting, the committee approved amendments to delegate enforcement duties to states and tribes, continue a ban on betting on sporting events, ban marketing aimed at children, and prohibit companies that violated the 2006 ban from obtaining licenses.